Up until this past September, I have never created or tried to live within a budget. Sure my husband and I were financially responsible and secure and I tossed around the word budget, but for twelve years of marriage we never actually created one on paper. Early in our marriage we used Quicken to track our income and spending, but it was all pretty much a big pot o’ money and a guessing game each month to try to stay in the black. We always were in the black, if you count the fact that we consistently put a big chunk of money in our retirement plans, but our liquid savings fluctuated…a lot. And while I thought it was great that we had any savings at all, in this economy of no job security Mike felt we needed a bigger cushion. Our spending habits were becoming somewhat wasteful and our shrinking savings was starting to stress him out, which is why we signed up for Dave Ramsey’s Financial Peace University.

One of the first things the class insisted upon was creating a monthly zero-sum budget. I very much disliked the word “budget” because it felt stifling, like a prison. But I’m a numbers girl and decided to try it, and FPU sometimes called it a “cash flow plan” which I greatly prefer. Dave’s book outlines several points about having a written plan.

a written plan removes the “crisis management” mode of handling money

it helps your money go farther

if you agree to it and live by it, a plan will help you avoid lots of money fights in marriage

a plan removes the guilt and fear that you may feel when buying necessities

a written plan prevents overdrafts and thereby removes a lot of stress

a plan will show if you are overspending in a given area

These are all great arguments in my mind for creating and sticking to a budget. It has certainly shown us where we were wasteful and has helped our money go much further.

Every Dollar Has a Name

A zero-sum budget assigns a purpose to every single dollar you spend. For us the biggest change was collecting our receipts and tracking cash purchases, like coffee or fast food. Every thing else was easily categorized through the use of the software program Quicken. It downloads the info from our various accounts and credit cards, and we were able to set monthly budget amounts in the program as well.

Mike is the “nerd” in our marriage and I am more of a “free spirit”, so he did the first round of setting up the budget and then called a budget committee meeting. FPU recommends having these meetings at the start of every month, and limiting them to 17 minutes. No kidding. The nerd shows the free spirit the numbers, the free spirit is allowed to suggest a few changes, and then they make an agreement to live by it. It has been a really great exercise for us to have these budget committee meetings, and the first money when I really tried to stick to it we saved way more money than expected. Almost a whole mortgage payment’s worth, which went straight towards our emergency fund. Budgeting has been not just good for our bottom line, it has been great for our marriage as well.

There’s so much more I could tell you about this, but I’ll save it for another day. If you’ve stuck with me to this point, good for you! I wouldn’t write about this stuff if I didn’t believe it could help people so much and take away so much stress and anxiety from their lives…which is the mission of this blog. I wrote about why I love Turbo Tax and a few cool tax deductions that are often overlooked yesterday, so be sure and check that out too.

Your turn…do you budget like this? Are you the nerd or the free spirit in your relationship? Does money cause you a lot of stress or do you feel in control of your financial house?

>We have kept a household budget for nearly 17 years, and it has kept major financial disagreements at bay. Dave Ramsey's FPU and books came out long after we set up housekeeping, but my husband's father gave us a personal tour through envelope accounting. Best marriage advice we ever received!

>I didn't think we needed one at all. I thought our bucket method was just fine. I have been surprised by how much of a difference it makes when I have micro-goals, like trying to stay under a certain amount for groceries, eating out, clothing, etc. I'm very goal oriented.

>Awesome. We never did try the envelope system but we have been pretty careful with tracking every penny and trying to not go over. There have been months we've gone over in some catagories, but not by that much.

>I'm not married but in a way that made me less accountable for my money. No one else was depending on me so I didn't feel enough responsibility. This year I am buckling down and following the Ramsey plan.

>There are a couple of categories where we regularly overspent, so at budget review time, we considered (and continue to consider) the importance of that category to our sense of well-being and adjust accordingly. Makes balancing the budget so much easier.

>Exactly. Like in December we pretty much knew we'd be eating out more with family in town so we adjusted. Same with our "gifts" category. But we adjusted again in January. Being flexible is one of the keys, in my mind.